Problem:
Peterson Packaging Corp. has a basic earning power of 9% on $9 billion of total assets, and its times interest earned ratio is 3.0. Peterson's depreciation and amortization expense totals $1 billion. It has $0.6 billion in lease payments and $0.3 billion must go towards principal payments on outstanding loans and long-term debt.
Required:
Question: What is Peterson's EBITDA coverage ratio?
a.2.06
b.1.52
c.2.25
d.1.10
e.2.77
Note: Be sure to show how you arrived at your answer.